Auto Companies are leaving India, and also coming to India

The irony is delicious: over the last three months, gloomy headlines crowded the Indian automobile space: Harley Davidson was leaving India; Honda shut down one plant, thus pulling the plug on a few car models; and the alliance between Mahindra and Ford ended before it began. The interwebs were agog with how the Indian market is still not mature enough to appreciate good vehicles and continues to prefer the least expensive vehicles, and how the government is not doing enough… and so on. And of course, there has been a long running debate on how India still prefers cars with low crash test ratings.

And then, news breaks out that Tesla has registered an Indian arm in India - a wholly owned subsidiary with three directors, out of an office in Bangalore. On the one hand, while some companies are exiting the market, the one company that seems to exemplify the automobile of the future is setting up shop in India. Of course, we eagerly wait to see where their R&D centers will come up, where the factories will be set up, and of course, when can we finally buy and drive Teslas.  

So what is it that the same market forces some globally renowned companies to throw in the towel, while others look forward to coming in, and yet others are able to make a turnaround? I guess it all comes down to how they think of India- another territory in the larger Asia-Pacific region, or as a subcontinent with more people than Europe. Europe has a population of about 900 million, as per Wikipedia. I daresay the purchasing power of the Indian middle class would be about the same as that of the European middle class, atleast on a purchasing power parity basis. But when it comes to bringing products into the Indian market, the global auto giants took the easy way out and dumped products made for other markets into this market, without much thought as to whether they would meet the Indian customer’s preferences. Agreed, the number of Indian customers who will shell out a premium for better quality and better features, at the cost of fuel economy is not very large, but they do exist. But then, they buy a premium product, only to be let down by inflated service bills, very costly spares, and even the spares being in short supply. This, when the humble Maruti owner has an authorized service center at very convenient locations, where he can get his car serviced and repaired for a reasonable rate. (Let’s not go into how the service centers inflate the bill and replace blinker fluid for the moment). They also seemed unable to find specific niches that they could fill in with their existing products. It’s interesting to see the various ways cars and bikes get modified to enhance performance, handling etc. and wonder why some companies did not bring products in their global lineup that could have fitted that niche. There are enthusiasts who still get misty eyed about the performance of the Ford Ikon, the Fiesta, the Fiat Linea etc. and wonder why did those companies not fully capitalize on the popularity those models had. GM and Ford would have, between themselves, arguably the largest number of models in any type and category worldwide; and yet GM folded up its India operations, and Ford..well..

At least some of the companies are trying out permutations and combinations. For their BS VI lineup, Renault-Nissan have focused on SUVs, CSUVs and MUVs because they seem to have decided to go where the Indian customer is, and give the customer a royal treat. They have packed their vehicles with features that customers demand, and at very tempting prices. Tata have taken the safety route, and are showcasing their products (hatchback, CSUV, SUV) as the safest in the market. Hyundai and Kia are offering feature rich SUVs and CSUVs, (with sunroofs almost mandatory).

So how will it work out for Tesla? Premium electric cars in a country with no charging infrastructure, and no electricity in some patches? Too early to say at the moment. For now, they just have an office address and three directors. Factory, R&D and all that have to come up first, followed by the sales and service network. It would make a lot of sense for them to develop India as a manufacturing and R&D hub, and start large scale manufacturing here. It would give them an edge to become the leaders in battery development and supply to the Indian industry (auto and others also) and use their global experience to set up the charging network. Ideally, the network should be a shared, universally compatible one; take a leaf out of the growth of mobile networks, who had independent tower networks, but finally converged and share a lot of the infrastructure now. But hopefully, Tesla will do their homework, and understand that what works in the US does not necessarily work here. Hope the next iteration of vehicles they have will have the Indian customer and Indian conditions in mind.